Economic policy uncertainty and cryptocurrency volatility

Kuang-Chieh Yen and Hui-Pei Cheng

Finance Research Letters, 2021, vol. 38, issue C

Abstract: We investigate the relationship between the economic policy uncertainty index (EPU) and cryptocurrency volatility. We find that a change in EPU of China predicts cryptocurrency volatility, but a change in the EPU of the U.S., Japan, or Korea has no such effect. Moreover, changes in the China EPU are negatively associated with Bitcoin and Litecoin future volatility, which may imply that Bitcoin and Litecoin are hedging tools against the EPU risk. However, changes in China EPU may not affect the cryptocurrency volatility after the Chinese government's regulation of crypto-trading.

Keywords: Bitcoin; Cryptocurrencies; Economic policy uncertainty; China; Volatility (search for similar items in EconPapers)
JEL-codes: C22 D81 G15 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (62)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:38:y:2021:i:c:s1544612319310189

DOI: 10.1016/j.frl.2020.101428

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